Luxury Push And Shove

With Competition Growing Faster Than Demand, Automakers Scramble For Their Share Of The Upscale Dollar.

November 14, 1996|By Automotive News

Competition in the luxury sedan segment is off to a bang-up start for the 1997 model year.

BMW introduced an all-new 5 series for 1997; Infiniti unveiled a redesigned Q45; Audi expects the Audi 8 later this year; Cadillac added the Catera, and Lexus added the redesigned ES 300, in tandem with the new Toyota Camry.

Prices have been cut by the two domestic brands, Cadillac and Lincoln, and imports such as BMW, Lexus, Infiniti and Jaguar.

The price cuts underline the fact that luxury sedans face competition from all quarters - from each other, from smaller, less-expensive ''near-luxury'' cars, and from a growing number of premium sport-utilities such as the Mercedes M class, due next year.

''Pick any imported luxury sedan, and that's who we compete with,'' said Bill Baker, a spokesman for Land Rover North America Inc. ''On the domestic side, (the competition) would be maybe a Suburban, a Lincoln or a Cadillac.''

Reflecting the growing competition for the upscale buyer's dollar, luxury-car prices will increase more slowly than inflation through the rest of the decade, said Susan Jacobs, an auto industry analyst who specializes in the luxury segment. She is president of Jacobs & Associates of Rutherford, N.J.

Jacobs said that for different reasons, the three major luxury-car sources - American, European and Japanese - are pushing for higher volume, and that means an excess of vehicles.

Jacobs said the impact of new-for-'97 models will be muted by overcrowding, an increasing frequency of launches, competitors fighting back with aggressive prices and/or lease deals, and the growth in luxury sport-utilities.

Ron Zarrella, General Motors vice president of North American Operations sales, service and marketing, said that by 2000, GM will have more truck models than it has today, and fewer car models, especially big luxury cars.

''Compared to 25 years ago, the people who are now buying Cadillacs are buying entry luxury cars (instead), and we haven't had an entry luxury car,'' Zarrella said in an interview in New York in September. Catera fills that void.

Here's a look at how automakers hope to entice buyers back to luxury sedans with lower prices:

Cadillac has lowered prices and dealer discounts on the 1997 Seville and Eldorado, with price cuts ranging from 5.8 percent to 9 percent. The 9 percent cut represents $4,000 off the old price of the Seville SLS. The new suggested retail price is $40,660, including $665 destination charge.

Lincoln has cut the 1997 Continental to $37,950, including $670 destination charge. That's 10.6 percent, or $4,520, below the 1996 model. Lincoln also cut prices 5.9 percent to 6.1 percent on the Mark VIII and shaved the dealer discount.

Jaguar has cut the suggested price of its standard-wheelbase XJ6 sedan by $1,920, from $56,900 to $54,980, including $580 for shipping and handling.

Infiniti has held the price of the 1997 Q45 to 1996 levels and cut an additional $1,450 off the 1997 Q45 Touring edition. That comes on top of a $5,620 cut for the 1996 Q45 in June. Suggested retail for the base Q45 is $48,395, including $495 shipping.

Lexus cut the base model 1997 ES 300 by $2,665, or 8.2 percent, on a comparably equipped basis. The new price is $33,395, including $495 shipping.

BMW has priced its new 5 series beginning at $38,470 for the 528i, including a $570 destination charge. That's more than 5 percent less than the previous model, based on comparable equipment.

In 1989, BMW was the first luxury brand in recent memory to cut some sticker prices and hold the line on others.

Audi also has cut prices, including the cost of its optional all-wheel-drive.

Mercedes-Benz of North America has stuck with a ''value-pricing'' approach since it introduced the C class for the 1994 model year. When it introduced the all-new E class last year, Mercedes reduced some prices or held prices steady despite adding equipment.

Mike Jackson, Mercedes executive vice president, said the price cuts reduced the need for subvented lease deals, brought sticker prices in line with transaction prices, and allowed Mercedes to get away from having to sell the ''deal of the week.''

Market could grow

Jacobs, the auto analyst, says that the aging of baby boomers could help larger-size luxury sedans stage a comeback, despite the challenge of a growing number of luxury sport-utilities.

From 1995 to 2000, the 55-and-older age group will increase, while the under-35 group will decrease, she said. From 1995 through 2005, Jacobs said she expects volume in the luxury-car segment - a much bigger segment than luxury sedans alone - to increase only around 1 percent, to less than 1.4 million.

Within that total, the sub-segment she defines as mid-sized luxury - for instance, the BMW 5 series, Infiniti Q45, Mercedes' E class and Volvo wagons - should increase the most, followed by premium sports and compact luxury vehicles.

Full-sized luxury vehicles and traditional sedans will decline, but by less than 1 percent, she predicted. Traditional coupes such as the Buick Riviera, the Cadillac Eldorado, and the Lincoln Mark VIII will decline the most, she said.